Monday, April 09, 2018

Trump’s Trade Tactic Might Work

By Holman W. Jenkins, Jr. | The Wall Street Journal

Americans should not be too quick to sell their own side short.

A game of chicken can always end badly, but why is the U.S. press doing China’s work for it?

Right now a bargaining game is under way that could leave the world trading system better off, with China cheating less. Not the least benefit, this would strengthen the political sustainability of trade in the U.S. and other Western nations—an outcome of high strategic value even to China.

Both sides are in the crotch-grabbing phase at the moment. They want their threats to be treated as credible even if they aren’t.

So eager are some Americans for a Donald Trump failure, though, they rush to convince the world that Americans can’t tolerate the slightest risk of pain or loss in a good cause. U.S. soybeans are on China’s target list, but let us calm ourselves. If China buys Brazilian soybeans, the world doesn’t end.

Brazil’s customers would buy U.S. soybeans. The net effect would be only slightly damaging to all concerned, except for the rail and shipping companies that would benefit from the world opting for second-best logistics in getting the global soybean crop to market.

Ditto Boeing . Its jets are on China’s retaliation list too, but a reality check is in order. Boeing and Airbus have backlogs stretching out almost a decade.

If a Chinese carrier cancels a delivery for next year, it can’t just cut the Airbus line, at least not without paying through the nose for another customer’s delivery slot. 

Or it could settle for an older, secondhand aircraft, knowing it would pay a penalty in fuel efficiency, passenger amenities and maintenance downtime that could be the difference between a successful service and a money-losing one.

Donald Trump’s rhetoric often fails to notice that trade is a win-win, but the peanut gallery should not lose sight of the same basic context in today’s trade fight: Both sides are putting guns to their own heads and saying, “Give me what I want or the idiot gets it.”

Such incentives strongly favor the parties reaching a deal and declaring victory for the benefit of the home fans. Both know the U.S.-China trade relationship is too important not to put it on a sounder basis.

So the real question is, “Do we have confidence in the wisdom and perspicacity of the Chinese and U.S. administrations?” Mr. Trump is not a child. He has been in negotiations all his life. It’s the one skill he brought to office that can’t be gainsaid.

What’s more, Mr. Trump is not a bridge burner, whatever you think of his Twitter habits. He is always ready to be best friends tomorrow with whomever he’s at war with today. 

His relationship with the “failing New York Times” is the cognoscenti case in point. No news organization has been so relentlessly denounced and yet so relentlessly courted by Mr. Trump. He can’t give up. He is not likely to lead us down a path of permanent hostility with China (or anybody else) from which there is no return.

The Chinese deny it but they know the U.S. has legitimate gripes, especially with respect to Beijing shaking down U.S. companies for their trade secrets as a price for getting access to the Chinese consumer.

China has gotten by with claiming it’s a poor, backward country, but such excuses no longer suit its own idea of itself. Look for a settlement in which Beijing insists it never engaged in technology theft and now will stop. It will launch new laws and courts to hear complaints of its foreign partners. Sure, these reforms you wouldn’t take to the bank right away. 

But, long term, China’s interest in profiting from its own intellectual property should propel it in the right direction.

Americans, though, have to be ready to accept some risk if they want China to change its behavior. Danger can always be avoided by bending over for whatever China wants. 

Happily, the U.S. economy is strong right now, verging on a labor shortage as rising wages can’t lure the Obama-discouraged back into the workforce fast enough.

Stock markets will never be happy with uncertainty, and you might wish to put your portfolio in a medically induced coma for the duration. 

But it pays not to sell America short, given its inherent, deeply rooted strengths. 

These strengths are admired by others, including China. 

They were apparent even on President Obama’s watch, with all its dreary regulatory and antibusiness overkill. His tenure will still be remembered, if dimly, as the time when America’s frackers revolutionized the world energy scene.

Mr. Trump is not the idiot his detractors say, and nobody says the Chinese are idiots. The omens are propitious for a major advance in trade relations. 

But the Chinese should remember one thing: Mr. Trump is a teetotaler, so the eventual congratulatory toasts should be nonalcoholic.